Court File and Parties

Court File No.: CV-13-494002
Date: 20131205
Superior Court of Justice – Ontario

Re: LEON MASSA, Plaintiff

And:
ALEX SUALIM, SANDRA SUALIM, SANDRA OLUWOLE-AINA, 2078749 ONTARIO LTD., BAUHAUS HOME BUILDER LTD. and OZILI INC., Defendants

Before: Stinson J.

Counsel:
Ruth Promislow, for the Plaintiff

No one, for the Defendants

Heard: December 5, 2013

Endorsement

[1] This is a motion for a Mareva injunction and related relief, brought without notice to the defendants. I heard it in two stages, on December 4 and 5 2013. When plaintiff’s counsel appeared before me on December 4 she had available only a slim affidavit from the plaintiff, by reason of perceived urgency in obtaining the relief sought. The matter was further complicated by the fact that the plaintiff resides in British Columbia and was not personally available here in Toronto. When I indicated to counsel that, in my view, the initial evidence was insufficient to warrant the granting of Mareva relief, she requested an opportunity to obtain a more detailed affidavit from the plaintiff. I granted that request and she returned today with a further supplementary motion record containing detailed evidence from the plaintiff in support of his claim.

[2] Read as a whole, the evidence presented on behalf of the plaintiff supports the conclusion that he has been the victim of a fairly sophisticated fraud. A similar scheme has been used to defraud at least 10 other victims, all in the United States. The total loss exceeds $13 million. The defendant Alex Sualim has been arrested and indicted for fraud in Arizona, where he currently remains in custody. The plaintiff has never met Mr. Sualim, but he alleges Mr. Sualim was the perpetrator of the fraud. All of their communications were via email and telephone conversations.

[3] In general, the fraudulent scheme was as follows:

a) The fraudster or his associates would contact the victim through an unsolicited email that was purportedly being sent by a representative of a company. In the email, the victim would be offered an opportunity to serve as a distributor of the product – silicon germanium, a semiconductor product used in computer chips – that the company wished to purchase from a Chinese supplier.

b) If the victim responded favorably to the initial inquiry, the fraudster would next exchange further communications with the victim in an effort to build trust. The fraudster would not ask for any money during the initial communications – instead he would suggest that he intended to obtain a loan to fund the purchase of the product from China, and that the victim could serve as a distributor without any upfront investment. In addition, the fraudster would provide the victim with electronic copies of seemingly legitimate identification documents and passports to support his fictitious persona.

c) Once trust was built in this fashion, the fraudster would typically tell the victim that he had not been able to obtain the loan and that the transaction could not proceed unless some other source of funding was obtained. The fraudster would then ask the victim if he would be willing to split the upfront purchase price.

d) If the victim agreed to this proposal, the fraudster would provide wiring instructions that explained how the victim could remit his portion of the purchase price to the Chinese supplier. These wiring instructions typically called for the victim to wire the money to a foreign bank account.

e) After the victim would make an initial transfer into the foreign bank account, the fraudster would typically contact the victim to explain that, due to some unforeseen change in circumstances (e.g. a change in the Chinese supplier’s minimum purchase requirement) the victim needed to wire more money to the foreign bank account before the transaction could be completed.

[4] Having been lured to participate in the scheme through the foregoing steps, Mr. Massa advanced and lost $840,000. He now comes to court seeking Mareva and other relief against the defendants, who are Mr. Sualim and his spouse and several corporations controlled or associated with them.

[5] As I have noted, Mr. Massa never met Mr. Sualim. The first question to determine, therefore, is whether the evidence supports the conclusion that Mr. Sualim was the perpetrator or one of the perpetrators of the fraud against Mr. Massa. In support of this conclusion, counsel relies on extensive material furnished by American law enforcement authorities, which was prepared in connection with the indictment obtained in Arizona as against Mr. Sualim. Having reviewed that material in detail, I find there are extensive similarities and overlaps between the fraud perpetrated against Mr. Massa and those that are the subject of the Arizona criminal proceeding. This supports the inference that they were carried out by the same person and thus the conclusion that Mr. Massa was victimized by the same fraudster involved in the Arizona cases.

[6] The next question to answer is whether Mr. Sualim was the fraudster. In support of their conclusion that the fraudster was Mr. Sualim, the American law enforcement agencies examined emails and email addresses that were used in those frauds. There is an overlap between some of the email contact information in the Arizona cases and those in the present case. The US information also reveals a connection between Mr. Sualim and the underlying email addresses.

[7] Based on the foregoing, I conclude that there is strong circumstantial evidence to support the conclusion that Mr. Sualim was the fraudster or otherwise complicit in the fraudulent activity of which Mr. Massa was a victim. I therefore conclude that, on the motion before me, the plaintiff has made out a strong prima facie case that he was defrauded by Mr. Sualim.

[8] I should mention at this juncture that I was concerned that there may have been certain conduct by Mr. Massa that might have disentitled him to injunctive relief. The first was the possibility that Mr. Massa should have known that he was being asked to engage in a scheme by which his new business partner would be defrauding or taking secret commissions from the partner’s employer. The supplementary affidavit provided by Mr. Massa explains that, based upon the telephone information provided by the fraudster, Mr. Massa took steps to satisfy himself that there was nothing improper about the intended course of dealings

[9] Secondly, at a late stage in the transaction, Mr. Massa sought to have the Chinese supplier reduce the face price of the product being supplied, in order to avoid paying tax. He now admits that this was an impropriety on his part. Needless to say, the transaction was never concluded and thus there was no actual tax evasion.

[10] Counsel submits, however, that this impropriety on the part of Mr. Massa is not such that he should be denied equitable relief. She relies on several authorities to support the proposition that “the iniquity must be done to the defendant himself” to amount to a basis for denying equitable relief. See City of Toronto v. Polai (1969), 1969 339 (ON CA), 8 D.L.R. (3d) 689 (Ont. C.A.) at pages 699 – 70; BMO Nesbitt Burns v. Wellington West Capital Inc, 2005 30303 (ON CA), [2005] O.J. No. 3566 (C.A.) and Sherwood Dash Inc. v. Woodview Products Inc. [2005] O.J. No. 5298 (S.C.J.). On the basis of the foregoing authorities, I conclude that the “clean hands” doctrine does not apply, and that I may consider the claim for an injunction on the merits

[11] The evidence of the plaintiff does not implicate anyone other than Mr. Sualim in the actual fraudulent schemes. That said, the information obtained from FINTRAC regarding financial transactions among Mr. Sualim, his co-defendant spouse Sandra – who is named as a defendant in both her birth name and her married name - and the three corporate defendants suggests that there have been extensive transfers of funds among these various parties. As matters stand, there is evidence that would support the conclusion that at least some of the proceeds of the fraud perpetrated upon the plaintiff may have been shared among the various defendants. At this early stage in the proceedings the plaintiff has not had the opportunity to complete a forensic analysis of the defendants’ financial dealings, which is not surprising. The evidence does support the conclusion, however, that there are grounds for believing that the defendants have assets in this jurisdiction.

[12] The final prerequisite for granting Mareva relief is that the plaintiff must give some grounds for believing that there is a risk of the assets being removed or dissipated before the judgment or award is satisfied, or why a marina injunction is necessary to prevent a fraud on the court or the adversary: Aetna Financial Services Ltd. v. Feigelman (1985), 1985 55 (SCC), 15 D.L.R. (4th) 161 (S.C.C.) at 168. In the present case, the defendant Sandra has recently disposed of at least one of the properties owned by her in Toronto. Based on the conduct of the defendant Alex Sualim, there is some basis to infer a sufficient risk of dissipation of assets that would render remote the possibility of future tracing of assets, and the resulting frustration of the enforcement of any judgment the plaintiff may ultimately obtain.

[13] I therefore conclude that the plaintiff has made out a case for the relief sought. He has filed the required undertaking with the Court. On this basis, an order shall issue in the form of the draft submitted by counsel and vetted by me. I have signed the original order.

Stinson J.

Date: December 5, 2013